Rising cement sales buoy Grasim Q2 net

Published:
29 October 2007

Diversified Birla group company, Grasim Industries, has reported a 50% rise in its net profit for the second quarter, led mainly by its cement and viscose staple fibre businesses (VSF), two fast-growing sectors that feed the construction and garment industries.

The company, which also has interests in chemicals, sponge iron and textiles, said its net profit in the July-September period rose to Rs 620 crore, from Rs 414 crore last year. Revenue grew 25% to Rs 3,973 crore in the same period. Agencies reported that the performance was above market expectations. The stock, which rose 1.8% on Friday, has gone up 33.2% in the September quarter, outperforming the Sensex which grew 18%.

A rise in global demand along with the demand for knitted fabric and increased prices saw the VSF business post a good performance, Grasim said in a statement. Production of VSF — India’s largest and among the top-most producers globally — was up 7%, while sales volume improved by 11%. Grasim is further increasing its capacity in VSF through a combination of expansions and new plants.

In the cement business, where Grasim is India’s largest producer, the company is expanding capacity by 10.2 million tonne at subsidiary UltraTech by spending Rs 3,480 crore. Grasim already makes 33 million tonne of cement and wants to corner a higher share of the local market, which is the world’s second-largest after China.

With foreign cement majors such as Holcim and Lafarge boosting their India presence, the stage is set for more action. In sponge iron, production rose mainly because of the use of alternate fuels.

The business, which is widely speculated as not being a priority for the Aditya Birla group, saw sales volume rise 28%. Although prices of sponge iron were strong, “the impact was partially offset by higher feedstock cost,” Grasim said. Natural gas is the main fuel for the sponge iron, which has been affected by the irregularity of gas supplies.

In the chemicals segment, Grasim said its business was affected by the shutdown of a captive power plant. Prices are expected to remain depressed because of a demand-supply mismatch from new capacity additions, the company added. In textiles, the sales grew marginally to Rs 88.3 crore from Rs 84.8 crore last year.